Report recommends for Vietnam to become a high-income economy

06:00 | 13/06/2020 Society

(VEN) - Although great achievements have been made in economic development, some of Vietnam’s main growth drivers are gradually weakening, according to a recently issued World Bank report entitled “Vibrant Vietnam: Forging the foundation of a high-income economy”.

report recommends for vietnam to become a high income economy

Vietnam is facing a number of challenges as the country’s golden population structure shifts and global trade declines, while pollution and automation are growing. The ongoing Covid-19 pandemic could be an accelerator of these trends, according to authors of the report.

According to the World Bank, on their path to a high-income economy, most countries must mull ways to improve efficiency and increase productivity. The Republic of Korea, for example, avoided the middle-income trap by increasing productivity from 16 percent in the 1970s to 43 percent in the 1980s and 56 percent in the 2000s. If efficiency is not improved, Vietnam’s GDP per capita will decline from 5.4 percent in the 2010-2018 period to about four percent in the 2030-2040 period, the World Bank warned.

To cope with such a changing environment, Vietnam needs to strengthen its productive assets, and address four priorities, according to the report’s authors.

The first is to build dynamic firms by encouraging competition and easing red tape. Dynamic firms can only be created in a supportive business environment that ensures access to finance, transparent regulations and legal protections. Efficient and sustainable infrastructure is the second priority. Vietnam has built up a large stock of infrastructure. It now needs to improve the efficiency and sustainability of infrastructure services, including financing, and operations and maintenance.

The third priority is to train skilled workers and provide them with fair opportunities. The country scores well on basic education, but it will need to promote university and vocational-technical skills that are becoming even more important for a productivity-led growth model.

The report also highlights the green economy as one of Vietnam’s key development targets, noting that sustainable development requires more effective management of renewable natural resources such as land, forest and water; stricter pollution controls, including in major urban centers; and mitigation of and adaptation to the inevitable growing impacts of climate change.

“Vietnam is one of the greatest development success stories of our time. The country, however, is now at a turning point where some of its traditional drivers of growth are gradually weakening,” said Ousmane Dione, World Bank country director for Vietnam. To achieve its ambition to become a high-income economy by 2045, Vietnam must put productivity growth front and center of its economic model, Dione added.

According to the World Bank, a productivity-driven development model - combining innovation with balanced development and allocation of private, public, human and natural capital, will be key for Vietnam to achieve its goal of becoming a high-income economy by 2045.

Hoa Quynh